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Ideas for Twitter’s Revenue Model

The survey I ran last week is now closed and here is a summary of the ideas and comments collected. Some are fairly traditional and some are rather novel. Take a look, see what’s interesting and leave a comment on which ones you like or dislike.

NOTE: My comments for each of the ideas are not criticisms of those ideas, but simply additional commentary and context.

Advertising Revenue Model - Twitter should figure out a model where brand owners pay Twitter to get in front of all those eyeballs. Seems to be a very prevalent Ad driven model in todays economy.

[Saeed] Looks like Google and Microsoft are already all over this idea. Outside of advertising, there are a lot of options for Twitter. As Biz Stone said in a WSJ article recently:

…Twitter recently hired a product manager to oversee the development of commercial accounts. The accounts would offer users more features in exchange for a fee, but Mr. Stone says Twitter hasn’t set a launch date for them.

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Revenue Share with Carriers: Tie up with operators worldwide and crack a revenue share deal on the SMSs sent to Twitter. Most people who’re using Twitter from mobile would find this capability useful and since there would be just the regular charge there’s no mindset barrier to break.

[Saeed] - This is an interesting suggestion though I wonder what would convince carriers to give up revenue to Twitter that they can keep for themselves right now. Twitter is driving SMS traffic but has no control over the carrier the user has.

Other SMS related services charge those who create the SMS traffic (e.g. mobile marketing companies). Perhaps the idea could be reversed, where carriers provide specific Twitter packages and branded clients and then split the revenue back with Twitter.

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Per Tweet Fees: Charge per tweet, leave following and view tweets free, or just charge per tweet from cell phones. 5 cents a tweet. Or if yearly it depends, If I was using it for promoting my business $250 a year, personally no more than $20 a year.

[Saeed] - Charge per tweet would be hard to justify given tweeting is free right now. On the SMS side there might be a possibility for some fees or packages similar to what the carriers provides for SMS.

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Account Analytics and Social Sphere Recommendations: Track, monitor and analyze your twitter account for $5.99/month. Tell me how many followers I have over time, how many of them are talking with me, and with each other. Show me my social sphere as well as historically. Show me my reach, my depth, my breadth. Show me people I should follow because we know the same people and might be interested in each other. Give what you give now for free and charge for all the extras.

[Saeed] - These services are starting to emerge. TwitterCounter, Twitter Analyzer, TweetStats etc. are starting to provide this functionality as are firms that provide analytics (Omniture), but this is certainly an area where more can be done.

Perhaps users might pay 3rd parties for this, but it’s also something that Twitter could support as they are the platform owner. In the end, Twitter will have to play nice with the more established 3rd parties who provide more than simply Twitter statistics, such as reputation management and social media monitoring companies. Twitter is certainly the center of attention right now, but that won’t last forever.

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Ask the Expert on Twitter: The ability to ask questions and receive answers from an individual or group within an industry who are designated as experts on Twitter. Would pay anywhere from $1-$10 based on the quality of the answers received. Would be useful to anyone who is searching for specific information that is not readily available via a Web search.

[Saeed] - This is an interesting suggestion. I guess both the question and the answer have be extremely short or else the conversation has to leave Twitter and go elsewhere. Yahoo! Answers currently addresses this need for free, as does the Q&A on LinkedIn, as do many other services. Google Answers has been shut down but they were one of the pioneers who tried to enable a “pay-per-answer” service.

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In part 1, I described some of the responses received from a survey I ran a couple of weeks ago asking readers for ideas on how Twitter could generate revenue. Some of those ideas included:

Advertising

Revenue share with carriers for SMS

per Tweet fees

Better analytics and social sphere recommendations (monthly fee)

Ask the expert (per question fee)

Here are some more suggestions made by people in the survey.

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Categorizing your tweets/contacts - For about $5 per month, the ability to label/tag tweets by Friends, Family, Work, etc, so that it wasn’t just “everything is visible to everyone”.

[Saeed] - I’ve always wondered why Social Networking sites don’t allow me to collect my contacts and group them into my own categories, like those listed above. To me this is such a core capability it should be part of the base offering. In the real world, I certainly don’t speak to all my contacts identically so why should I be forced to do it online? If I only want to send a tweet to my local Toronto contacts, or my family, or a certain subset of my business associates etc. I should be able to do that.

I like this idea, but I wouldn’t pay extra for it personally. To me, it should be a core capability.

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Enable micro-payments via Twitter - Allow you to make micro-payments to Twitter users / non Twitter users. Basically make a payment to anyone with an email address. Using Twitter’s user base and simple design, micro payments could not be easier. Why is it so hard to pay someone $5.00 on the spot when you don’t have cash ? With the explosion of the mobile web, a lot of users have access to Twitter, now you can provide a small fee based service to capitalize on a simple business that has not been implemented correctly on the Internet yet.There are no fees or charges for the person receiving payment. Charge $0.25 per micro-payment.

[Saeed] - I really like this idea. Anything to bring a secure, simple, cost-effective, P2P micropayment system would find a lot adoption. But perhaps there are regulatory or other reasons why such a system hasn’t already come into play. This capability is something that ANY Social Networking site could enable - Twitter, Facebook, LinkedIn, MySpace etc.

My bank here in Canada allows me to transfer funds to someone’s email address. Just paid back a friend in California some money I owed him using that mechanism. It was pretty easy to do but I had to log into my online banking system and go through a bunch of screens to do it. So, the capabilities are there, some business just has to take the next step and make it dead easy — AND totally secure — to use.

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Better tweet filtering - For about $5 per month, allow me to filter tweets. e.g. more from user 1, few from user 2 etc. Also implement a SILENT Stop Follow. I don’t want some folks to know I really think they are boring.

[Saeed] - Similar to categorizing your tweets/contacts, this to me is base functionality. Certainly a good Twitter client could implement better filtering very easily. OTOH, the SILENT Stop Follow is something Twitter needs to implement. But then, with good enough tweet filtering, you’d never have to see tweets from people you think are boring. Good suggestion, but on it’s own I don’t think it’s worth $5 per month.

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Other ideas - Here are some other ideas that could be used for differentiating the service for paid and unpaid users.

Every 100th tweet you receive is a relevant advert (location, context, etc).

[Saeed] - All of these are good suggestions, bu IMHO, only #3 really could be chargeable. The value of followers is large. The value of following is small. i.e. if I follow 10,000 people what does that actually mean? Is there any meaningful way for me to actually comprehend 10,000 different tweet streams?

Having followers, like having subscribers to an email list has value, as it allows someone to broadcast their message out and then potentially have those messages retweeted, driving traffic to their website or just having people hear what they have to say. The problem though is that, like listservs and discussion forums etc. before Twitter, the cost of alternative solutions is very low, so it would be surprising if many people were willing to shell out anything more than a small, marginal amount to pay for followers.

Ashton Kutcher has well over 1,000,000 followers. All for free right now. Note that he only follows a couple of hundred people.

Demi Moore has about 800,000 followers. And she only follows a very small number of people.

The list goes on and on. What would it be worth to these celebs if they had to pay for the following? And what about non-celebs like CNN (1,000,000+), New York Times (700,000+), The Onion (~600,000), Whole Foods (500,000+), Woot (500,000+) etc.

Twitter needs to find something of true value that people will pay for, not simply something like # of followers.

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My Approach - So if I were the Twitter PM, here’s what I’d be thinking.

The base service MUST remain free. There’s no arguing that point.

Segment the users into some rational delineation of users. Look at the top 1000 and see what groupings and patterns can be found. Identify what value-added services these groups need or would pay for and use that as the basis for new offerings.

There are celebrities: Ashton Kutcher, Demi Moore, Britney Spears, Shaquille O’Neil, Lance Armstrong, John Mayer and so many others. What do they (or more likely their staff) aim to do with it? What goals do they have when communicating to their fans via Twitter? Are there merchandising opportunities that could be enacted via Twitter?

There are news organizations: CNN, the NY Times, The BBC, The Onion, NPR etc. Same questions. How are they using Twitter and what benefits do they derive? Are there joint monetization strategies that could be enacted with these news orgs.

There’s a lot of segmentation possible and each group can be queried to provide insight into the benefits they see of Twitter and the kinds of value-add services they’d be willing to pay for.

Aside from some form of search advertising, I doubt there are too many strict horizontal, highly scalable revenue models that Twitter could exploit. So a segmented approach is needed.

Beyond the audience of users, look at the ecosystem who use the API for extended clients, analytics etc. Do they get unrestricted free access to the API and all the services Twitter provides? What value are they deriving from the infrastrucutre? Is there a shared revenue/expense model that could be defined with those companies?

It won’t be easy. Facebook is still trying to figure out how they can generate sustainable revenue. But then who knows, maybe the PM team at Twitter will find something can turn Twitter into a real business — you know, one that has revenue AND profits, in addition to providing a very popular messaging service!

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